Updated at 12:54 p.m.

A developer for Walgreens is negotiating the purchase of a key part of the Kmart site on Nicollet Avenue, throwing a curve ball at city officials trying to reopen the intersection.

City officials say Semper Development outbid the city for the former Supervalu site beside Kmart -- owned by a local real estate partnership. The news adds a layer of complexity to the city's quest for a coordinated redevelopment of Nicollet Ave., but also shows there is strong private sector interest in the area.

But a leader of that partnership, John Leighton, said the purchase agreement from November remains unsigned by Semper. Semper has not responded to a call seeking comment.

The wrinkle in the Nicollet redevelopment means that if the city succeeds in reopening the site, the area will likely feature two major national retail chains. Kmart, which has several decades left on its lease, has already insisted that it remain at the intersection as part of the redevelopment. The city is still working to purchase that part of the property.

Council Member Lisa Bender told the Whittier neighborhood Monday night Semper had originally intended to build a one-story retail store on the site. (Update: City officials later clarified that they merely anticipated this would be their development proposal.) The city encouraged them instead to pursue a mixed-use design for the land more in line with the city's redevelopment plan.

"They are talking with residential developers who would be able to partner with them to deliver a mixed-use project that would likely have a Walgreens and other retail on the ground floor and then would have apartment buildings above," said Bender, who did not mention Semper by name.

David Frank, the city's director of transit-oriented development, said Semper has been responsive to the city's request. "We have to have density here," Frank said. "And that message was received and we're glad to see that Semper, who is not really in that business…is working on finding somebody to partner with."

Frank said if all the development plans can be coordinated, Semper's move is a "great sign."

"The public doesn't need to take the lead if the private market is going to do it," Frank said. "We would take the lead because the private market isn't there yet and to accomplish goals that the private market wouldn't produce."

That coordination is especially important because the Kmart site is large enough to cover both sides of a reopened Nicollet (see above aerial). So if the city suceeds in purchasing the Kmart site, the western block of the redevelopment would have a mix of owners.

"Whatever happens [at the Supervalu site], we really really want to make it coordinate with what's going to happen on the rest of the new block," Frank said.

Leighton said he does not know why the agreement wasn't signed. "We went through a negotiation process and for whatever reason [Semper] hasn't signed it," Leighton said, adding that "if somebody else came along and offered to purchase the property, they'd be first in line."

Frank said the unsigned agreement is likely merely a reflection of an ongoing negotiation. "There are two private parties who have come to terms -- or largely come to terms -- and we the public are not in the business of trying to jump in there with our elbows out and force our way into the private market," Frank said.

Correction: This post has been updated to correct an earlier version which said the former Supervalu site is owned by Jerry's Foods. Jerry's Foods is a tenant on the site, which is owned by a local real estate partnership.